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Disruption and Change

Future: Brand importance will rise as technology limits choice

Brand importance will rise

as technology limits choice

But the risk of disintermediation is urgent

Posed in its most provocative form, the central question about the future of brands is, does it exist? What role do brands play in a world of disintermediation and automatic replenishment where even the newest no-brand upstart, launched on an e-commerce platform, can gain rapid legitimacy? The short answer: Brands need to assert their importance or risk becoming an endangered species.

More brands and non-brands proliferate in the marketplace. Challenger brands are likely to come from China and other fast-growing markets, delivering not only appealing products and prices, but improved brand experience enabled by AI and other technologies.

Many of these brands have met the high expectations of Chinese consumers who purchase groceries and take-away meals, hail cabs, pay bills, and manage much more of their daily routine on mobile devices, without have to leave the ecosystem of Alibaba, Tencent, or another internet giant.

The internet’s low barrier to entry will enable more such brands—and non-brands—across categories, to enter global markets using e-commerce and social media. In personal care, for example, major brands are being disrupted by Asian brands, or non-brands, with good stories, natural ingredients, and low-cost online access.

Although choice has never been greater, consumers are not always the “choosers.” Increasingly, a personal assistant, like Alexa, may make the purchasing decision based on an algorithm, paid search results, or promotion of its own private-label range. These phenomena make getting into the consideration set more challenging.

To be included in a consideration set that is simultaneously enlarged with new competitors and limited by algorithms, brands need to communicate a clear purpose and explain why they are Meaningfully Different, and perhaps even merit a premium. Difference needs not only to be about product, but every aspect of the brand experience.

Disintermediation

The Amazon Dash Replenishment service illustrates the growing threat of disintermediatio. When introduced several years ago, the service required consumers to press a “Dash” reorder button. The program now supports automatic replenishment of “smart” products made with a chip, a built-in “Dash” button, that tracks consumption and signals the need to reorder.

At the same time, voice personal assistants, like Amazon’s Alexa, threaten to disrupt brands by being the gateway into the home in the Internet of Things and disintermediating brands that are not part of the particular ecosystem, whether it is Amazon, Google, Apple, or another technology brand.

The proliferation of voice is likely to limit, or at least mediate, the brand choice available to the consumer. This development makes it more important to build high brand awareness, especially beyond functionality. Brands will need to be innovative, not just in the products they develop, but also in their customer service and communications.

Voice also will be an aspect of brand identity. The pitch and tone of a brand will communicate a brand’s audio identity to complement its visual identity. Voice is part of a brand’s constellation of touch points, which need to connect and perform at the same level.

Disruption will also come in the form of private label, an old phenomenon re-energized by the power of internet giants, like Amazon, which can market its house brands of FMCG products and other offerings to its Prime members and beyond.

Difference and Purpose

Disruption is best countered with differentiation. Purpose can serve as an important differentiator. Ultimately, purpose is kind of emotional connection, part of the brand promise beyond functionality that can strengthen the bond with consumers and influence them to actively request a brand rather than passively be served one by an algorithm.

Purpose needs to be genuine and relevant to the brand. And communicating purpose, particularly higher purpose, requires care. Brand purpose expressed poorly can do more harm than good, leaving a brand looking tone deaf and out-of-touch.

For brands with momentum, purpose can drive some price premium, according to BAV research, which also found that higher purpose, a brand’s connection with social responsibility, is more important to consumers in Europe compared with the US. Purpose is important across consumer categories, especially to reach young people.

Purpose is also important for the future of B2B brands, particularly in categories like as oil and gas, where the business model includes inherit risk, and media attention amplifies problems and mistakes. In these instances, being clear about the brand’s larger purpose can help blunt criticism. In the case of oil and gas, for example, purpose (providing the energy that enables people to live in the modern world) can help moderate criticism and buy time for the long, but in evitable, shift away from carbon fuels.

The importance of having a real purpose that adds benefit to the consumers life and living up to that purpose with a consistent brand experience, has not changed—although the experience may now include streaming video, augmented reality, and voice. And, ironically, surviving in a disruptive future, and communicating purpose, also will require reviving and updating proven strategies of an earlier, pre-digital world.